The Organization for Petroleum Exporting Countries’ (Opec) members would be able to make up for a drop in Iranian oil supplies if the European Union was to agree to an embargo on the country’s imports, said Chakib Khelil, the group’s former president.
Saudi Arabia, the biggest producer in Opec, has oil in onshore storage and in tankers, Khelil said in an interview. “It should be possible to replace at least the European consumption of Iranian oil,” he said.
Crude futures gained since the middle of last month, partly because of concern that tensions between the West and Iran could disrupt supplies to global markets. In addition, production may start shutting this week in Nigeria, Africa’s biggest supplier, if unions don’t reach an agreement with the country’s government on fuel subsidies, according to the Pengassan union.
“This year is exceptional,” said Khelil, who is also Algeria’s former energy minister. “We are seeing some problems coming up in Nigeria, and like experience has shown, we never can guess what may happen. This year we could be surprised by the prices.”
Hormuz closure
Crude has been buoyed this month by tensions with Iran after the country’s vice president Mohammad Reza Rahimi said on December 27 that Iran would consider closing the Strait of Hormuz, the transit point for a fifth of the world’s crude. Iran is the second-biggest producer in Opec.
An extended closure of the waterway may push crude oil to $200 a barrel, Khelil said, echoing a forecast for Brent this week from Mike Wittner, Societe Generale SA’s head of oil market research. “People were talking about $150 to $200. It depends for how long the strait would be closed,” Khelil said.
France, Germany and the UK have been pushing for an embargo to increase pressure on Iran over its nuclear program. The 27-member bloc may delay any halt to Iranian oil imports for six months to let countries such as Greece and Italy find alternative supply, an EU official with knowledge of talks said yesterday. Greece’s refineries relied on Iran for about 20 per cent of their crude last year.
Battered economy
“Europe actually is in a tremendous crisis right now and a peak in oil price would batter the economy more,” Khelil said. “Especially for those countries like Greece which have suffered already from that crisis.”
A global economic slowdown could see crude prices roughly halve from current levels, Khelil said. “You could have a tremendous economic crisis, in that case the oil price could fall down to $50,” he said.
Nigerian workers are striking over a cut in fuel subsidies this month that has caused gasoline prices to more than double. Nigeria produced 2.1 million barrels of crude a day in November while Iran pumped 3.55 million barrels, bringing their combined output to 6.3 percent of global supply, according to the International Energy Agency.
Crude futures traded at about $98 a barrel on the New York Mercantile Exchange today. Brent was at $110 a barrel on the ICE Futures Europe exchange in London.
